Dutch spot milk prices are on the floor, but that is not unexpected given that the main Dutch processor Friesland Campina is paying a bonus for farmers to hold December supply for the first six weeks of the year. There is little or no spare processing capacity in the Netherlands prior to new operations coming on stream in March, so there is little or no appetite for spot milk from the markets.

Contrary to advice, Dutch farmers are holding and increasing output, seemingly for reasons other than markets. Some suggest new phosphorus reference periods might be in the pipeline and hence they are maximising output now to offset any potential extra cost in the future.

In general, the EU observatory suggests dairy prices decreased in the last week, with the most interesting global change being the significant decrease in US butter quotations. The quotes on 11 January show US butter at $4,491, down from $4,561.

The other important product from an Irish perspective is whole milk powder and quotes are down under the $3,000/t barrier, with quotes on 11 January at $2,965, down from $3,031. US prices for all other dairy products are slightly higher than European or US prices, but not near as significantly as the butter difference. For example, the price quoted for powder in New Zealand and Australia is $2,100/t, with EU prices closer to $2,500/t and US quotes around $2,965/t.

In terms of milk supply, feed and energy prices have decreased in recent weeks, so intensive European and US farmers in particular won’t get a signal re input prices to decrease production.

While December export volumes from New Zealand reached new records, Fonterra is still forecasting a year-on-year reduction of milk volumes by at least 6% this season as farmers respond to the low milk price environment and dry conditions impact parts of New Zealand. Since the middle of last summer, Fonterra has reduced the amount of whole milk powder it offers on the Global Dairy Trade platform, which it says is moving through other channels rather than the auction channel.